Cintas Said to Be Target in 2007 of Failed $8 Billion Bid

By Joshua Fineman and Joshua Gallu -
Dec 2, 2010

Cintas Corp., the largest U.S.
supplier of uniforms, was the target in 2007 of a failed $8
billion bid and leaked information about the offer is being
investigated by regulators in their case against a former
Deloitte Tax LLP partner, according to a person with knowledge
of the situation.

The bid for an unnamed Company C was revealed in a U.S.
Securities and Exchange Commission lawsuit filed Nov. 30 in
California against a former Deloitte partner and his wife
alleging insider trading. Company C was Cintas, said the person,
who spoke on the condition of anonymity.

Arnold McClellan, 51, and his wife Annabel McClellan, told
family members of at least seven confidential buyouts between
2006 and 2008 planned by Deloitte’s clients, the SEC said in the
suit. Their relatives made about $3 million in profits,
according to the complaint.

Company C had a market capitalization of about $6.1
billion, according to the SEC, roughly the same value as Cintas
at the time. McClellan signed a confidentiality agreement on or
about July 25 on the potential deal, the SEC said. Company C was
initially approached by one party and then received interest
from others, according to the lawsuit, which didn’t identify the
potential buyers.

Since July 13, 2007, Cincinnati-based Cintas declined 32
percent through yesterday, when the stock closed at $27.88 on
the Nasdaq Stock Market, for a market value of about $4.1
billion. It was up 32 cents, or 1.2 percent, at $28.20 as of
1:53 p.m. New York time.

UniFirst, G&K Services

Cintas’s competitors include UniFirst Corp., which has a
market capitalization of $1 billion, and G&K Services Inc., with
a market value of $523 million. Closely held Aramark Corp.’s
uniform and apparel business is the second-largest in the U.S.,
with $1.6 billion in fiscal 2009 sales, according to the
company’s annual report filed with the SEC.

McClellan, who headed one of Deloitte’s regional M&A
teams, passed information to his brother-in-law, James Paul Sanders, the SEC said. Sanders, co-owner of London derivatives
broker Blue Index Ltd., was charged along with two colleagues by
the U.K. Financial Services Authority last week for trading on
the tips.

McClellan allegedly revealed information on deals including
the buyout of Kronos Inc. in 2007, Microsoft. Corp.’s
acquisition of AQuantive Inc. the same year and the 2008 buyout
of Getty Images Inc., the SEC said.

Attorneys for the McClellans said after the suit was
announced that their clients deny the allegations. A spokesman
for Deloitte said Nov. 30 the SEC doesn’t allege any wrongdoing
by the firm. Sanders denied the FSA’s allegations, Kevin
Robinson, his lawyer at Irwin Mitchell LLP, said Nov. 25.

“The planned acquisition of Company C and the engagement
of Deloitte were confidential and not publicly disclosed,” the
SEC suit says. The SEC didn’t address in its complaint why the
deal didn’t go through.